Course-Level Activity-Based Costing as an Academic and Financial Tool

To deliver a quality education in a budget-constrained environment, academic and financial decision makers must understand the activities, costs and margins associated with teaching at the course level.

Summary

A growing student population coupled with reduced state funding led the University of California - Riverside to examine its costs and find ways to scale student instruction effectively. As part of this initiative, the university implemented an enhanced activity-based costing (ABC) tool. The new ABC tool integrates data from the university’s enterprise system with survey responses from faculty and department chairs to estimate, for each course in the curriculum, teaching activity profiles, resource utilization, financial outcomes, and rough quality surrogates. This paper describes the reasons the university developed the tool, its conceptual framework, the information it provides, and its application in academic planning and decision making.

Faculty and other academics need tools and knowledge to assess the trade-offs between cost and quality – and the efficacy of cross-subsidies among courses and departments – because administrators themselves cannot do that job effectively.

Recent advances in university enterprise systems (especially timetabling and student registration systems) have enabled development of new assessment tools, so now only modest supplementary data need be generated by survey.

Familiar aggregate metrics for assessing teaching “productivity” (such as cost per credit hour) for courses, departments, degree programs and such are readily calculated from the enhanced ABC tool in a way that helps faculty improve their offerings.

This paper is one of five in the TIAA Institute Higher Education Series: Understanding Academic Productivity. The TIAA Institute undertook this initiative in support of the National Association of College and University Business Officers’ Economic Models Project, which aims to provide colleges and universities with knowledge, ideas and tools to advance the difficult structural, cultural and political changes required for moving to more sustainable economic models.

Activity-based costing is not designed just to reduce costs; the goal is to gather and use information about costs to maximize quality for any level of spending.

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